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Exxon Corp. v. Mack

Decided: November 28, 1989.

EXXON CORPORATION,*FN1A CORPORATION OF THE STATE OF NEW JERSEY, AND BP AMERICA, INC., A CORPORATION OF THE STATE OF DELAWARE, PLAINTIFFS-APPELLANTS,
v.
DAVID C. MACK, ACTING ADMINISTRATOR OF THE NEW JERSEY SPILL COMPENSATION FUND; RICHARD T. DEWLING, COMMISSIONER OF NEW JERSEY, DEPARTMENT OF ENVIRONMENTAL PROTECTION, AND NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, DEFENDANTS-RESPONDENTS



King, Shebell and Baime. The opinion of the court was delivered by Shebell, J.A.D. Baime, J.A.D., concurring.

Shebell

This appeal involves two questions surrounding the interpretation of the arbitration provisions of the Spill Compensation and Control Act (Act), N.J.S.A. 58:10-23.11n(a). The first is whether a draw by the New Jersey Department of Environmental Protection (NJDEP) from the Spill Fund (Fund) constitutes a claim against the Fund, thereby triggering a right to arbitration. The second question is whether the scope of permissible arbitration includes a determination of responsibility for cleanup and removal costs.

On July 7, 1987, the defendant NJDEP issued a directive to 28 separate corporations, including plaintiff BP America, Inc. (BP), requiring them to remove hazardous substances from the Borne Chemical Company (Borne) site in Elizabeth, New Jersey.

The NJDEP's directive also required the named parties to secure the Borne site and to take steps to protect against the possibility of fires, explosions or imminent harm to the environment.

On March 14, 1988, BP formally demanded that the defendant, Acting Administrator of the Environmental Claims Administration (Administrator), on behalf of the Fund, convene an arbitration board pursuant to the Act, N.J.S.A. 58:10-23.11n(a), to "challenge the assessments contained in DEP's cleanup Directive for the Borne Site." By letter, dated April 12, 1988, the Administrator rejected BP's demand. On May 19, 1988, BP sent a letter to the Administrator objecting to his rejection of its demand for arbitration and renewing its demand. This demand was also denied.

On May 27, 1988, BP, along with Exxon, filed a complaint in lieu of prerogative writs in the Law Division seeking to compel the Administrator to convene an arbitration board. The defendant NJDEP moved to have the action transferred from the Law Division to the Appellate Division. See R. 1:13-4. On September 2, 1988, this matter was ordered transferred to this court.

According to the NJDEP directive, chemical operations on the Borne site were carried out from 1917 until 1984 involving the "blending and mixing of various petroleum hydrocarbons and additives into lubricants, the mixing of tanning and dye products, and packaging and shipping of these and other chemical based products and wastes. . . ." In addition, Borne stored and warehoused various chemical-based products and wastes. During a portion of that time, BP North America Trading, Inc., now part of BP, "utilized the services and facilities of Borne for manufacture, storage and distribution of its chemical-based products and wastes, including hazardous substances."

The NJDEP first identified a pollution problem at the Borne site in 1978. On February 15, 1980, Borne filed a petition for voluntary bankruptcy pursuant to 11 U.S.C.A. ยง 101, et seq. (Chapter 11) in the United States Bankruptcy Court for the

District of New Jersey. The Bankruptcy Court authorized the trustee to abandon the site on October 10, 1986. Between 1983 and April of 1985, NJDEP was negotiating with Borne's owners and waste generators to undertake removal and disposal of waste at the Borne site. However, the parties were unable to reach an agreement due to Borne's financial condition.

On April 4, 1985, the State formally requested authorization for $2,375,000 from the Fund for the purpose of sampling, staging, removal and disposal of hazardous waste materials at the Borne site. To date, only $11,743 has been expended from the Fund for the Borne site; apparently for testing and securing estimates for the cost of cleanup. According to representations of the Attorney General, the present status remains as described by the chief regulatory officer, Bureau of Hazardous Waste Enforcement:

Based upon [a] review of Department files, and upon consultation with representatives of the Administrator of the Spill Compensation Fund, to date [July 13, 1988], there have been no damage claim or claims for cleanup and removal costs presented to the Fund for payment respecting the Borne site. The only expenditures from the Fund to date for the Borne site have resulted from direct draws upon the fund made by the Department, including the amount referenced in Paragraph 14 of the Complaint. Assuming the Directive remains unsatisfied, the Department plans to continue making direct draws upon the Fund to cover projected cleanup expenditures.

The NJDEP issued a directive on July 7, 1987, naming 28 corporations it believed were responsible for removal of hazardous substances at the Borne site. The directive gave notice that failure to perform the required remedial and preventive action within 30 days could result in NJDEP doing the required work with public funds, and that as a result the named parties could be liable for treble damages for work done by NJDEP. The deadline for compliance was extended by NJDEP until December 22, 1987. We are advised that in September of 1989, 18 companies entered into an agreement, entitled Administrative Consent Order II, with NJDEP to comply with the directive.

BP's demand for arbitration requested a determination of the amount of cleanup and removal costs "and ...


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